A couple of weeks ago, I shared what to watch for in 2024 that may impact the trajectory of the market, based on a blend of data-driven analysis and market trends by John Walkup, Co-Founder and Partner of UrbanDigs Analytics. Yesterday our Chief Economist, Greg Heym, shared some very illuminating perspectives on the current market and future projections. The session was highly informative, so I wanted to share some key takeaways as the year ends.
1. Economic Resilience:
Despite challenges, American consumers displayed remarkable resilience, keeping the economy robust even as savings were depleted. Notably, unemployment remains low, wages are outpacing prices, and there are 8.5 million job openings with unemployment standing under 200k.
2. Federal Reserve Actions:
Greg pointed out that the Fed's delay in raising rates contributed to higher inflation. Currently, the economy is performing well, but cautiousness is urged to avoid future inflation risks, making rapid rate drops a potential concern. The Fed's apparent conclusion of rate hikes anticipates three cuts in 2024, likely in the second half of the year, followed by four times in 2025 and three times in 2026.
3. Surprising Market Stability:
Contrary to expectations, the market has not entered a recession. With a low likelihood of one occurring, Greg predicts a soft landing, challenging the belief that such a scenario was previously impossible.
4. Mortgage Rate Predictions:
According to Greg, we may have seen the peak of rates and anticipates a downward trend moving forward. Some housing economists are predicting a gradual decrease in mortgage rates throughout 2024. It’s also worth noting that there is no direct relationship between Fed rates and mortgage rates.
5. Manhattan's Unique Market Dynamics:
While the national inventory supply is less than two months, Manhattan boasts 7.1 months' supply. Surprisingly, Manhattan prices remained stable in 2021, not fluctuating despite increased demand, hinting at the potential for a strong 2024. Pent-up demand and the gradual rate decline may be other factors that lead to increased sales activity in the new year. Buyers, who have been patiently awaiting market entry and adapting to current conditions, are expected to return from the holiday break, contributing to the surge.
6. Contract Trends in Manhattan:
Manhattan experienced its worst November for signed contracts since 2005. Despite a sluggish start, the volume of signed contracts is expected to increase next spring.
7. Affordability Challenges:
Housing affordability is a growing concern due to the double impact of rising prices and rates. The shortage of supply, exacerbated by insufficient construction during the COVID era, poses a significant challenge.
8. Office Space Dynamics:
The housing market in 2024 may be influenced by banks and hedge funds urging employees to return to offices. This shift could impact demand for housing in Manhattan.
9. Election Year Factors:
With election years approaching and ongoing governmental disagreements, the real estate market may experience further uncertainties, necessitating a cautious approach.
As we navigate the dynamic landscape of NYC real estate, Greg’s insights provide valuable perspectives. Whether anticipating rate cuts, monitoring market stability, or considering the impact of office dynamics, we should remain vigilant for a potentially eventful 2024.